Since VIX spot is not tradable, why do the futures and spot converge @ expiration? By what mechanism does this occur if arbitrage is not one of them?
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2$\begingroup$ As pointed out by @noob2 arbitrage can take place via SPX options market. Note also that because the VIX is not tradable is not a reason they should not converge - the SPX price index is not tradable either but has futures that converge to the price at expiry. $\endgroup$– user34971Commented Apr 4, 2022 at 8:27
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The futures deliver cash, but the amount of cash is calculated at 8:30am Chicago time on the delivery day using a formula that is almost identical to the VIX formula. (There are minor differences to better exclude untradeable options from the calculation). So basically you receive "the value of the VIX at 8:30" on the delivery day. Of course in the minutes (and days) before this the futures converge to the live VIX, which is constantly recalculated and published by the CBOE, it is a reasonable estimate of what the 8:30 calculation will yield. And arbitrage via the options market can take place, since the formula is based on S&P option prices.
You can read in more detail here under Product and Settlement information
